Help to Buy ISA vs lifetime ISA
Help to Buy ISAs are now closed to new applicants. But, the good news is, they've been replaced by lifetime ISAs which also come with a 25% government bonus to help you buy your first home.
If you're just starting to save for your first home, you're looking for a lifetime ISA, not a Help to Buy ISA - sometimes lifetime ISAs are referred to as "help to buy ISAs" which can be confusing as they're different products!
Here's where you need to be: Lifetime ISAs
If you already have a Help to Buy ISA, you can transfer it to a lifetime ISA. Both come with a 25% bonus on your savings – but with a lifetime ISA, you can use this bonus for your mortgage deposit, making it potentially more useful.
If you're considering transferring, read on to find out how the two products differ.
Help to Buy ISAs
Help to Buy ISAs are closed to new applicants, but if you already have a Help to Buy ISA you can still pay in up to £200 each month until November 2029.
Help to Buy ISA rules
- You can save up to £12,000 in a Help to Buy ISA and you get a 25% government bonus (up to £3,000) on the money you've paid in.
- You get the the bonus money after you buy your first home. As it's paid when the house purchase has completed, you can't use the bonus for your deposit.
- The property must be worth £250,000 or less if it's outside London, or up to £450,000 in London, for you to get the 25% bonus.
- You have to claim the Help to Buy bonus by December 2030.
Lifetime ISAs
Lifetime ISAs replaced Help to Buy ISAs.
You can open a lifetime ISA if you're a UK resident aged between 18 and 39 (inclusive). You can pay into the account until you reach the age of 50.
The government adds a bonus each month, which is 25% of however much you've paid in that month (there's up to £1,000 bonus available each tax year). As the bonus is paid monthly, it can be put towards your house deposit. Find out how much bonus you could get with our free lifetime ISA calculator.
How our customer, Dan, used his OneFamily Lifetime ISA to buy his first home
OneFamily customer, Dan, landed an extra £11,000 towards his first home using his lifetime ISA. Read his story to find out how his lifetime ISA helped him reach his home ownership goal.
Lifetime ISA rules
- You can put up to £4,000 each tax year into a lifetime ISA.
- If you take your money out for anything other than buying your first home (and haven't yet turned 60), you'll be charged a withdrawal penalty fee so you should be sure that this is what you'll use the money for before you open the account.
- The property you buy must cost £450,000 or less regardless of where it is in the UK, otherwise you'll be charged the withdrawal fee when you complete.
- It must be the first property you've bought and the lifetime ISA has to have been open for a year before you can use it.
See the full list of rules here: Lifetime ISA rules
What's the difference between a Help to Buy ISA and a lifetime ISA?
| Lifetime ISA | Help to Buy ISA |
|---|---|
| Pay in up to £4,000 each tax year | Pay in up to £12,000 in total |
| Must be aged 18 - 39 (inclusive) to open | You can't open a new Help to Buy ISA |
| Get the bonus monthly - can use it towards your deposit | Get the bonus after you buy your home - too late to use for deposit |
| Property must cost £450,000 or under | Property must cost £250,000 or under (£450,000 if in London) |
| Available in either cash (earns interest) or stocks and shares (invested on your behalf) | Only available as cash (earns interest and isn't invested) |
You can't receive the government bonus on both
While you can have both a lifetime ISA and a Help to Buy ISA, you can only receive a government bonus on one of them.
Is a Help to Buy ISA or lifetime ISA right for you?
There are a few things to consider if you're trying to decide whether to transfer your Help to Buy ISA to a lifetime ISA.
- The price of the property.
If you're planning on buying a property worth more than £250,000 (outside of London) then you'll only be able to get the government bonus on a lifetime ISA. If you're buying in London, the limit on both is £450,000. - How much you want to save and how quickly.
Lifetime ISAs allow you to save up to £4,000 a year with no overall limit - but you can't pay any money in after you reach 50. With Help to Buy ISAs, you can save up to £12,000 in total over any time period, but you won't be able to pay in after November 2029. You need to save at least £1,600 in your Help to Buy ISA to get the government bonus. - When you want to buy.
If you withdraw money from your lifetime ISA within 12 months of the date you make your first payment in, you'll be charged the government withdrawal fee, even if it's to buy your first home. - Whether you want to use the government bonus towards your deposit or not.
With a Help to Buy ISA, you won't get the bonus until after you complete your house purchase, but with a lifetime ISA the bonus is added to your account each month you pay money in. - Your age.
You have to be under 40 to open a lifetime ISA and you won't be able to pay any money in after you reach 50. - How much risk you want to take with your money.
Help to Buy ISAs are cash ISAs, meaning the money grows by earning interest like a current account. Lifetime ISAs, on the other hand, are available as either cash ISAs or stocks and shares ISAs. If you move your money from a Help to Buy ISA into a stocks and shares lifetime ISA, your savings will be invested in the stock market and while this could mean you end up with more money, there is also a risk the value could go down.
Annual lifetime ISA limits
It's worth bearing in mind that if you do move your savings into a lifetime ISA, you can only move up to £4,000 each tax year. Once you've paid in £4,000, you'll need to wait until the allowance resets on 6 April (start of the new tax year) before you can pay any more money in.
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Thinking of transferring an existing Help to Buy ISA or lifetime ISA to OneFamily?
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